Try Smart Scan for profitable trade setups
The 15 Best Investing Books of All Time
Investing is one of the most important skills to learn in life, yet it is not a subject that is taught at school. Instead, we learn many useless subjects that have nothing to do with our lives and would not bring success or happiness. Many new graduates end up with thousands and thousands of dollars in student loans that may take a decade to pay off.
If one wants to be successful and make passive income, investing is one of the best things to learn. The younger you get started, the better. However, investing is not easy. It takes hard work and effort, and it comes with risks. Here are the best investing books of all time that can get you started in the world of investing.
The Best Investing Books of All Time
1. The Intelligent Investor
The intelligent investor is written by Benjamin Graham, the teacher of Warren Buffet. It is one of the best stock market investing books ever written. The original edition of the book was published in 1949, almost 75 years ago, yet the investing principles presented in the book are still relevant in today's stock market.
Warren Buffett attributes his success to this book, it was this book that inspired him to enroll in Columbia Business School of Columbia University and study under Benjamin Graham. Using the methods taught in The Intelligent Investor, Warren Buffett grew his net worth to over 124 billion and became one of the richest men in the world.
The main idea of the book is to buy companies when they are cheap and never overpay for stocks. The only time to buy a stock is when the stock offers a good margin of safety after comprehensive research.
Using an imaginary investor Mr. Market, Benjamin Graham states that oftentimes the market may go crazy and offer prices that are ridiculously high. We should avoid that kind of market. We should only take advantage of Mr. Market when he offers us low prices.
2. How to Make Money in Stocks
How to Make Money in Stocks is a book written by William O'Neil, the founder of Investor Business Daily. The CANSLIM investing strategies presented in the book are a very powerful system in a bull market. This is the book that turned my trading around as I was a losing trader before reading this book.
The author advised that investors should only buy a stock if it meets all the criteria of his CANSLIM strategy.
- C = Current Quarterly Earnings Per Share - A company should see its current quarterly earnings up at least 25%-50%, the higher the better.
- A = Annual Earnings Increase - A company should grow its annual earnings by at least 25% to 50% per year.
- N = New Products, New Management, New High - Most growth companies come up with new innovative products that dominate the market, and new entrepreneurial management teams that can lead the company to a new level. And don't be afraid to buy stocks that are making new highs.
- S = Supply and Demand - If two stocks with similar fundamentals, pick the one with few shares outstanding because it is much harder to move a stock with 5 billion shares than one with 5 million shares.
- L = Leader or Laggard - Buy the leader and sell the laggard.
- I = Institutional Sponsorship - Buy stocks that show increasing institutional sponsorship.
- M = Market Direction - Buy only when the general market is up.
The ideas of this book somehow contradict what we learn from The Intelligent Investor, as the former states that we should buy growth stocks that are on the rise in order to catch the super stocks whereas the latter says that we should stay away from stocks that are too expensive and only buy stocks that are undervalued and gives investors a margin of safety.
The market doesn't stay constant, it changes all the time. What I've found is that How to Make Money in Stocks works well in a bull market, and The Intelligent Investor keeps us from trouble during market peaks when the trend is about to turn.
For example, I've made some decent money buying tech stocks with the strategies I learned from How to Make Money in Stocks from 2012 to 2018. I exited the market too early and missed out on the gains from 2019 to 2021. However, The Intelligent Investor prevents me from jumping back into the market and helps me avoid the market crash that started in late 2021 and continued in 2022 when many big tech stocks such as PayPal, Square, Shopify, and many others fell as much as 80% in a matter of months.
There are traders and investors who make money from the growth approach, others make money from the value approach, and some earn money from using a combination of both strategies. Investors should test and find a strategy that works best for them.
3. The Warren Buffett Way
The Warren Buffett Way, by Robert G. Hagstrom, is a book that goes into detail about how Warren Buffet invests in companies over the years. This is the best book written about Warren Buffet as an investor.
The Warren Buffett Way uses case studies on how Warren Buffett makes decisions on many of his major stock acquisitions, whether it is acquiring the whole company or as a shareholder.
Throughout these studies, one learns that Warren Buffett is unemotional to the daily ups and downs of the market. He has a long-term focus on stocks and his favorite holding period is forever. This long-term strategy allows him to compound his money every year without paying heavy taxes for capital gains.
Warren Buffett is not afraid to bet big on his best ideas, and his biggest returns are from a handful of stocks.
Warren Buffett does not try to predict the macro future, he only invests in companies that he thinks are undervalued. This value investing strategy helps him avoid many major market crashes such as the tech bubble in 2000 and the financial crisis in 2008.
In fact, while other investors are panicking and lose money during a market crash, Warren Buffett is busy hunting for bargain stocks because he has no problem buying stocks when others are scared and selling when others are greedy.
If we can apply the investing philosophy of the world's greatest investor, we will be on our way to financial freedom.
4. One Up On Wall Street
One Up On Wall Street, by Peter Lynch, the fund manager who averaged a 29.2% annual return from 1977 to 1990 at Fidelity Investments. He grew the assets under the Magellan Fund from US$18 million to $14 billion in 13 years.
Peter Lynch's investing philosophy is to own lots of stocks, which differs from Warren Buffett's focus approach.
Peter Lynch suggests that good companies are all around us. We should pay attention to the malls and the products surrounding us.
If you find a product that everyone around you is using and talking about it, chances are you may find a golden nugget. Research the company that makes the product and dig into its financial statements to see the whole story. If you see a store that is always full of shoppers, make sure you want to check out the company details.
Another strategy Peter Lynch suggests is to find good companies in a boring industry because competition is much higher in a hot industry.
Most funds and institutions on Wall Street have strict requirements on what kind of stocks they can own. As retail investors, we do not have any restrictions. We can buy small-cap stocks with good fundamentals.
Utilizing Peter Lynch's strategy, retail investors may uncover good companies long before Wall Street does. By the time the stock becomes a hot stock, the stock price may be pushed even higher by institution ownerships.
5. The Essays of Warren Buffett
The Essays of Warren Buffett, by Lawrence A. Cunningham, is a must-read investing book because it has all the investing principles of Warren Buffett in his own words.
Warren Buffett shares his investing philosophy with shareholders through his annual letters which you can read for free on the Berkshire Hathaway website. This book reorganizes Warren Buffett's letters into easier to read format and divides his principles into different sections.
There are many things that Warren Buffett studies whenever he buys a stock or acquires a business.
- Is the business easy to understand and predictable?
- Are the sales and profitability growing?
- Does the company have a competitive edge?
One of the most important elements that he looks at is the CEO and the management team.
- Does management think like shareholders? Are they on the same side as shareholders or are they trying to maximize their compensations at the expense of shareholders?
- Do management own shares of the company?
- What does the management do with its cash?
- Does the company buy back its shares when its share price is undervalued?
- Does the company issue new shares to acquire another company that is overvalued for the sake of growing?
- Is the board of directors also shareholders of the company?
The book will expand your knowledge on corporate governance, financing and investing, mergers and acquisitions, common stocks, stock alternatives, valuation and accounting, and taxes, all of which will help you find and buy quality stocks and uncover truly great companies.
6. Common Stocks and Uncommon Profits
Common Stocks and Uncommon Profits, written by Philip A. Fisher, is another book that Warren Buffett highly recommended.
In fact, it is this book that inspired Warren Buffett to change his approach from buying only cheap stocks to paying a fair price for great business on the theory that great companies are rarely on sale.
Common Stocks and Uncommon Profits list 15 points that investors should follow in order to pick stocks that have massive upside potential. I will list a few points that I think are the most useful.
To find good stocks, an investor needs to ask these questions.
- Does the company have products or services that have the potential for a sizable increase in sales in the coming years?
- Does the company have a good management team that is determined to continue to develop products that will further increase total sales?
- Does the company have a long-term outlook in regards to profits? Investors should watch out for companies where their management is focused only on the short term.
- Are the management team honest with unquestionable integrity?
Some of these points might seem obvious today, but it was pretty groundbreaking at the time when the book was written. Read the book to learn all 15 points in detail with examples and see how they can help you become a better investor.
7. You Can Be A Stock Market Genius
You Can Be a Stock Market Genius, by Joel Greenblatt, a Fund manager that has been beating the Dow for more than a decade.
In this book, Joel offers a unique approach to investing that readers won't find in any other book. The author states that by studying the special situations of a company, one can find great companies at a bargain price.
- Merger Securities
- Rights Offerings
- Risk Arbitrage
There are logic and reasons behind these situations, but most investors including Wall Street generally stay away from companies that are undergoing major changes, which gives the retail investor an advantage in uncovering undervalued stocks.
He gives detailed examples of each special situation and how investors can find these types of investment opportunities on their own.
For example, In a spinoff, oftentimes the child company is undervalued. If the management of the newly spinoff company owns a lot of shares, that's a strong sign that they are confident in the company. Additionally, the investors in the parent company would sell their shares in the child company, and that allows outside investors to get in cheaply.
Following this spinoff strategy, I bought Paypal when it was spun off from eBay. I actually got in late and bought the stock in 2017, but still doubled my money in two years. The spin-off price for PayPal was around $40 on its first day of trading in 2015, and the stock peaked in 2021 at a price of around $300, that's over a 700% gain in 6 years.
8. The Five Rules for Successful Stock Investing
The Five Rules for Successful Stock Investing, by Pat Dorsey, is a beginner-friendly book that covers the same value investing principles as The Intelligent Investor.
The book introduces readers to the different types of financial ratios that are critical in finding hidden gold and deceptions of any company. He then gives examples of how to analyze real companies based on their annual reports, cash flow statements, and balance sheets.
Beginners will learn how to read a financial statement to find great companies that will thrive in the long term. They will also learn how to analyze companies from every market, from banks to technology stocks.
The five rules the author follows to pick winning stocks
1. Do your homework
2. Find economic moats
3. Have a margin of safety
4. Hold for the long haul
5. Know when to sell
9. Security Analysis
Security Analysis, another influential financial book written by Benjamin Graham with co-author David Dodd. The original edition of the book was published in 1934 and is considered the bible in the investing world.
Almost 90 years later since the initial book was released, the teachings of Benjamin Graham have withstood the test of time, and the investing principles are still relevant today.
While the investing concepts detailed in this book are useful and it gives practical advice for any investor looking to buy individual stocks, the book is not an easy read. This book is like a textbook version of The Intelligent Investor. If you are a new investor, it is highly recommended that you read The Intelligent Investor before getting into this one.
The new 2008 edition is expanded with commentary from some of today’s leading Wall Street money managers like Seth A. Klarman, James Grant, Jeffrey M. Laderman, and many others.
10. The Little Book of Common Sense Investing
The Little Book of Common Sense Investing, by John C. Bogle, was the founder of The Vanguard Group, which created the first index fund.
For those who think investing is too complicated or simply don't have the time to do all the digging and researching about company fundamentals and their management team, this book is for you.
In this book, the author proposed a long-term investment strategy that can beat most mutual funds and retail investors who pick individual stocks: low-cost index funds.
An index fund is a type of mutual fund or ETF that tracks the broad stock market Index such as the S&P 500. Bogle shows how owning broadly diversified, low-cost index funds is the best way that retail investors can grow their money without the risks of individual stocks.
People lose money in the stock market because many try to time the market, or they buy and sell stocks at the wrong time due to their emotions. Investing is hard and it's a loser's game trying to beat the market. By owning index funds, one can invest passively without the hassle of doing research on individual companies and letting your money compound each year.
In the long term, there are only three things that matter to stock prices, dividend yield, earnings growth, and change in market valuation. A portfolio of index funds is the best investment that guarantees one's success in the stock market.
11. Reminiscences of a Stock Operator
Reminiscences of a Stock Operator, by Edwin Lefèvre, is first published in 1923, almost 100 years ago. Unlike all the other books on this list, this book is a trading book rather than an investing book.
Investing is for investors who buy, hold, and sell stocks for the long term, usually over 1 year, whereas traders try to make money over a stock's price action. The holding period can be anywhere from a few minutes to a few weeks depending on the type of trader.
This is a timeless book that is highly recommended by many Wall Street traders. The book is about the life of Jesse Livermore, the most famous speculator in history, who made a fortune of $100 million in the Wall Street Crash of 1929.
The book shares the thinking behind Jesse Livermore's approach to the stock market and how he was able to make big money in such a short time using price actions instead of company fundamentals. Trading is a psychological game where traders must be disciplined at all times in order to execute their plans and strategies.
This is the only trading book that I include on this list because I feel it is a must-read book for any investor or trader who participates in the stock market.
12. Beating the Street
Beating the Street, is another great book written by the legendary fund manager, Peter Lynch.
In this book, Peter Lynch reveals how an individual investor can do research about companies and build a profitable investment portfolio. He reminded readers that there is a company behind every stock, and when an investor buys a stock, he becomes the owner of that company. Unfortunately, most people treat the stock market as a casino or lottery ticket which is a sure way to bust.
There are many case studies on how to evaluate companies across different industries that offer insights into how the author approaches the market. He devises a mutual fund strategy with step-by-step instructions on how a retail investor can pick winning stocks and improves the performance of his investments.
If you like the book One Up On Wall Street, don't miss this one.
13. The Little Book That Still Beats the Market
The Little Book That Still Beats the Market, another book by Joel Greenblatt. This is an introductory book for the stock market which is perfect for beginners who are just getting started.
The book explores how the stock market works and the basic principles of successful investing. The author then reveals a time-tested investing strategy that can outperform the market by applying a formula to filter out the bad companies from the good. As long as investors stick to this formula during the good and bad times, they can beat the market in the long term.
14. Poor Charlie's Almanack
Poor Charlie's Almanack, written by Peter D. Kaufman, is a book about Charles Munger. Charles Munger is the vice chairman of Berkshire Hathaway and the partner of Warren Buffett.
This book explores Charlie Munger's thinking process about the stock market and how to invest in stocks for the long term. He was the one who influenced Warren Buffett in the early days to pay fair prices for good companies instead of good prices for fair companies.
Readers will learn about how human psychology can have an impact on investing, and how to find companies that are worth investing in.
The price for this book is more expensive than all the other ones listed here, but it is well worth it. The book is not limited to investing, it is full of wisdom and gems about life, business, and success in general. Even if you are not an investor, you should probably still read this book.
Principles, written by Ray Dalio, founder of the world's largest hedge fund, Bridgewater Associates.
Just like Poor Charlie's Almanack, Principles offers more than investment advice. The book reveals hundreds of practical lessons about life, management, economics, and investing, and how they can all be systemized into rules that you can follow.
Whether you are an investor, a business owner, or a fund manager, you will learn the gems and insights of Ray Dalio's approach to the market and how he became a billionaire by investing.
Business owners will learn the principles of how Ray Dalio grew Bridgewatergrown into the fifth most important private company in the United States, and how the company has made more money for its clients than any other hedge fund in history.
If you read all 15 books on this list, you are already ahead of most people who ever buy stocks. Keep in mind that investing takes hard work and effort. You must be willing to put in the hours to study and improve your skills.
There are different economic cycles that will produce greatly different results no matter what investing strategies you use. Learn to be patient and focus on company fundamentals rather than trying to time the market, and you will be on your way to investing success.
Test the Signals